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of <h1>Tribunal Confirms Modvat Credit for Captive Power Plant Components as 'Capital Goods' Essential for Sponge Iron Manufacture.</h1> <h3>COMMISSIONER OF CENTRAL EXCISE, RAIPUR Versus HEG. LTD.</h3> COMMISSIONER OF CENTRAL EXCISE, RAIPUR Versus HEG. LTD. - 2004 (177) E.L.T. 605 (Tri. - Del.) Issues Involved:1. Qualification of parts, accessories/spares of Captive Power Plant (CPP) as 'Capital Goods' u/r 57Q/57AB of the Central Excise Rules, 1944.2. Disentitlement of capital goods duty credit due to non-payment of excise duty on steam/electricity generated in CPP and its usage outside the factory.3. Relevance of CPP in the manufacture of the final product 'Sponge Iron'.Summary:Issue 1: Qualification of CPP Parts as 'Capital Goods'The Tribunal examined whether parts, accessories, and spares of the Captive Power Plant (CPP) qualify as 'Capital Goods' under Rule 57Q/57AB of the Central Excise Rules, 1944. The respondents, M/s. H.E.G. Ltd., had availed credit on various components of the CPP used for generating electricity, which was essential for manufacturing sponge iron. The Tribunal upheld the Commissioner's decision that such components are integral to the CPP and fall within the definition of capital goods, as supported by the Supreme Court's decision in CCE v. Jawahar Mills Ltd. and relevant notifications during the period.Issue 2: Disentitlement Due to Non-Payment of Excise Duty on Steam/ElectricityThe Tribunal addressed whether the proviso to Rule 57R disentitles the availment of capital goods duty credit on parts of CPP, given that the electricity generated was not fully utilized within the factory and was partly wheeled out to another factory. The Tribunal found that the electricity generated by the CPP was not a final product and thus, sub-rule (1) of Rule 57R did not bar the respondents from availing Modvat credit. The expression 'for any other purpose' in the second proviso to sub-rule (2) of Rule 57R allowed the use of electricity for purposes other than manufacturing sponge iron, including transmission to another factory.Issue 3: Relevance of CPP in Manufacturing Sponge IronThe Tribunal considered whether the CPP had any concern in the manufacture of sponge iron, given that it was used exclusively for generating electricity. The Tribunal concluded that the CPP was essential for generating electricity, which was indispensable for manufacturing sponge iron. Therefore, the parts, components, and accessories of the CPP were eligible for Modvat credit under Rule 57Q/57AB.Conclusion:The Tribunal upheld the Commissioner's order, rejecting the Revenue's appeal. The Modvat credit taken by the respondents on the components of the CPP was deemed admissible, as the conditions under Rule 57Q/57AB were fulfilled, and the use of electricity generated by the CPP for purposes other than manufacturing sponge iron did not disqualify the credit.
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